Bond holders allege securities fraud
Wednesday, October 13th 1999, 12:00 am
News On 6
TULSA, Okla. (AP) -- Five corporations that bought bonds from
Commercial Financial Services Inc. have filed civil lawsuits
against the bankrupt company alleging securities fraud and other
The three separate, but nearly identical, lawsuits were filed
Friday in U.S. District Court by holders of nearly $340 million in
Each of the complaints stated that the business of CFS was to
defraud investors, and that CFS executives lied to potential
investors about the company's ability to collect debt.
CFS filed for Chapter 11 bankruptcy protection in December. The
Tulsa-based debt collection agency shut down in June after failing
to find a buyer. More than 3,900 people in Tulsa and Oklahoma City
lost their jobs.
"CFS's historical collection performance was never even close
to what it claimed," each of the three lawsuits alleged. "CFS
failed to collect anywhere near the amount needed to pay off the
buyers of the securities, or even enough to run its very expensive
Last month, three other separate groups of investors, holding
more than $700 million in CFS bonds, filed three similar lawsuits
against senior management and others.
Named as defendants in the three lawsuits filed Friday included
co-founders Bill and Kathy Bartmann and former chief financial
officer Jay L. Jones.
Also named were Dimat Corp. and its founder, attorney James D.
Sill Jr. Dimat purchased more than $63 million in charged-off
credit cards from CFS, despite that Jones was providing the
The defendants have denied any wrongdoing.
"In reality, the fundamental premise on which investors relied
-- that CFS and its purported computer model had a superior ability
to evaluate and collect on receivables -- was a blatant lie," each
of the three lawsuits alleged.
The lawsuits varied in the amount of damages requested.
Abbey National Treasury services, holders of $66.5 million in
bonds, and American International Assurance Co., of New York and
AIG Life Insurance Co., holders of a combined $26.3 million in
bonds, each requested compensatory damages of more than $50 million
and punitive damages of more than $100 million.
Cerberus Partners and Tri-Links Investment Trust, which bought a
combined $246.3 million in CFS securities, requested more than $200
million in compensatory damages and $100 million in punitive
All three lawsuits requested jury trials.